Lucent May Face Charges
by SEC
Citing unnamed government officials familiar with the probe, the newspaper said the Securities & Exchange Commission's enforcement division plans to send the company a so-called "Wells notice," which is frequently a precursor to the agency filing civil charges against a company.
A Wells notice gives the recipient a certain time to reply to the staff's allegations. Sometimes a Wells recipient succeeds in convincing the SEC that no action is warranted, but in most cases it is followed up by the filing of civil charges.
Lucent spokeswoman Mary Lou Ambrus said the company had not received a Wells notice from the SEC and the issue was not new.
"This is the same issue we brought to the attention of the SEC two years ago," she told Reuters. "We haven't received a Wells notice, but if we did it would be a routine matter."
Lucent has struggled the past two years during the telecom slowdown, as cutbacks in telephone company spending has forced it to slash jobs and money-losing products, sell noncore businesses, post billions of dollars in losses and play down investor fears of bankruptcy.
In November 2000, Lucent raised questions about its revenue recognition, and a month later revised its fiscal fourth-quarter results down by $679 million. The SEC took no action at the time.
The newspaper said the investigation centers on allegations that Lucent in 1999 and 2000 booked nonexistent sales and also booked large sales through a practice known as "channel stuffing." Channel stuffing occurs when a company encourages its distributors into taking on excessive inventory, goods for which the distributor is not obliged to pay if they don't sell